On iterative premium calculation principles under Cumulative Prospect Theory

Marek Kaluszka and Michał Krzeszowiec

Insurance: Mathematics and Economics, 2013, vol. 52, issue 3, 435-440

Abstract: In the paper we analyze the iterativity condition for zero utility principle adjusted to Cumulative Prospect Theory. We prove, under mild conditions, that the premium principle is iterative if and only if the value function is linear or exponential and probability distortion functions are identities, i.e. the probabilities are not distorted.

Keywords: Cumulative Prospect Theory; Iterativity; Zero utility principle; Non-expected utility; Generalized Choquet integral (search for similar items in EconPapers)
JEL-codes: D81 G22 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:insuma:v:52:y:2013:i:3:p:435-440

DOI: 10.1016/j.insmatheco.2013.02.009

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